A proposal prepared by the Campaign for Better Business Statistics

 

Summary:

There are many indications that the official business statistics, as produced by the Office of National Statistics (ONS), are no longer fit for purpose. Possibly the strongest evidence for that assertion is the manner in which the Office for Budgetary Responsibility has consistently under-estimated tax returns and over-estimated future government borrowing requirements.

However, the value of more reliable data is not limited to the treasury alone, for example:

• Business advisors, consultancies, accountants and auditors need an informed understanding of market sizes, developments and trends to advise their clients.
• The Media similarly need sound data on which to interpret, report and advise
• The Education sector, skills and capacity development organisations, both public and private, need good information on which to develop strategy.

Primarily, we attribute the source of error in current methods to be a failure to record the economic contribution of the so-called gig economy, which is predominantly internet driven/enabled and thus able to develop faster than start-up businesses were ever able to in the past. The result is that the reliance on traditional measurement methods yields results that are missing more and more of the growing economy.

We further hypothesise that, as suggested by Professor Bean in his Independent Review of Economic Statistics[1], the main source of this error lies with the measurement of the economic contribution of the small and very small ’business’ universe and one of our primary objectives is to investigate that sector with survey designs that more appropriate for these more modern enterprises.

In short: because there is currently no reliable source of business data covering the whole UK business community in a consistent and reliable manner, we propose to develop an independent Business Monitor which:

• is statistically reliable and timely
• includes all non-VAT registered businesses as well those registered for VAT
• minimises response bias through a combination of telephone and online data collection
• asks questions of more direct relevance to the modern internet enabled small business and part time entrepreneur
• estimates genuine economic value, not just sentiment
• makes extensive use of reliable public data (e.g. companies house data)
• uses advanced data collection and analytic techniques to yield more timely data

Such an independent monitor will enable us to re-calibrate UK business statistics and improve economic forecasting, making it fit for the modern business world.

The 3 primary requirements for success of the program are:

• A sample design that ensures representation of the totality of the UK economy and will also provide estimates within major sectors and by region
• Quantifies and communicates changes in the modern UK economy, as they occur
• Provides the optimal frequency of data collection and reporting. This will ultimately be ‘overnight’ (as was achieved for TV audience measurement years ago).

In essence we are proposing to use a number of different sample sources to provide a single estimation procedure using inverse probability methods to integrate the results by mingling the data from various sources, noting that, on occasion, a response might be obtained from More than one data source. The two primary data sources can be characterised as, firstly, a traditional business sample source (e.g. the Dun & Bradstreet’s business file) and, secondly, a consumer sample using a combination of online invitation and short telephone survey of the general population..

A primary longer term objective will be to monitor the so-called GIG-GEL[2] FACTOR being the ratio of the rate of growth of the gig economy to the rate of growth of the traditional ‘real’ economy. The resultant Key Performance Indicator for the regions will be an index comparing their Gig-gel factor to the National Average; thus a figure in excess of 100 will indicate a relatively larger gig economy for that region. In time this KPI can be extended to smaller areas than regions. Indeed if any town or city has an interest in understanding their Gig-gel factor this Autumn then we can arrange a special ‘boost’ sample for that area to provide the necessary estimate.

Status:

Much of the necessary methodology has been pre-tested but we are now planning a full scale pilot to determine the future optimum design of the monitor. This will comprise 4 main elements:

• A substantial B2B survey of VAT registered businesses, using an online questionnaire but supported by telephone interviews where necessary to achieve a representative sample. This latter will be designed to achieve representation of each of the UK’s 12 regions, 9 primary activities and 9 employee size groups. A minimum of 1,800 responses is planned.
• A survey of the self-employed and small businesses using a questionnaire similar to that used for the B2B survey described above and encouraging responses from groups such as the Federation of Small Businesses and IPSE.
• A major consumer study representative of the UK population to be asked a short question sequence designed to investigate ‘casual’ work / use of the internet for casual trading.
• We also plan to undertake some parallel experimental work using Google consumer surveys to evaluate that source and compare with more conventional methods.

This work is planned for September / October.

Competitive Analysis:

There are, of course, an extensive series of business studies produced each year by the ONS, none of which provide the comprehensive single source data we propose. In addition to this source there are a number of Business Monitors and reports as provided by the various business organisations, primarily through ‘polling’ their own members – CBI, FPB, FSB, IoD, BCC, ICAEW, ICC, RICS, CIPS and CIPD.

However, these are all characterised by the manner in which they are restricted to reporting ‘opinion poll’ percentage changes and those only at the national level. Also none of them cover the whole of the UK’s business community in a statistically reliable manner. Indeed all current surveys are based upon relatively small numbers and are NOT ‘projectable’ even to that part of the business universe that they represent.

Presently the Chartered Institute of Purchasing & Supply (CIPS) monthly PMI reports are considered to be the most authoritative available, insofar as they are occasionally mentioned by the Bank of England Monetary Policy Committee (MPC). However, they do NOT cover the whole economy in the manner we propose. Indeed the coverage of the traditional economy is not really representative since the Institute membership is less than 60,000 persons, compared with over 1.7 million VAT registered businesses.

Other membership, professional or other bodies, such as the ICAEW, ICC, RICS, CIPS and CIPD also collect data from members. Although statistically reliable, the resultant data bears little relationship to the UK economy as whole. For example the RICS (Royal Institute of Chartered Surveyors), look at the economy at a general level but focus on their own sphere of activity: namely – property. Similarly, the CIPD (Chartered Institute of Personnel and Development) concentrate on employment issues only.

Finally, the British Chambers of Commerce (BCC) produces a quarterly survey which they claim is the largest and most representative independent business survey, even so it cannot claim to be truly representative of the totality of UKPLC.

[1] Published 2016 – see https://www.gov.uk/government/publications/independent-review-of-uk-economic-statistics-final-report/press-notice-take-economic-statistics-back-to-the-future-says-charlie-bean )

[2] GIG-GEL for Gig – Generating Economic Lift